2024 (7) TMI 505 - AT - Income Tax

LTCG - Deduction u/s 54F - Determination of single residential unit - AO has disallowed the said deduction for the reason that the assessee has purchased residential house beyond the period of two years from the date on which the transfer took place and further by observing that the assessee that purchased more than one residential house, since the assessee has purchased four flats - DR submitted that the assessee has purchased four different flats and the possession was given to her in the year 2019- i.e. after expiry of four years from the date of sale of the land HELD THAT - In the present case, the assessee s rights have been created in the said four flats at the moment they were allotted to the assessee on the payment of consideration which falls within the stipulated time period prescribed u/s. 54F of the Act, therefore, the allegation of the AO that the said flats are purchased by the assessee after the expiry of the four years does not hold water. Since all the four flats are constituted as single residential unit and allotted by the builder as one single residential unit though having four identification numbers, therefore, they can be termed as one residential unit for the purpose of claiming deduction u/s. 54F of the Act. Assessee has purchased one residential unit only where four flats are merged together as one residential unit and finally got registered in same manner as a single unit though they have different numbers and, therefore, the assessee is eligible for deduction for entire cost of four flats u/s. 54F of the Act against the sale consideration received from the sale capital asset. Accordingly, we direct the AO to allow deduction u/s. 54F of the Act to the assessee as discussed above. Appeal of the assessee is allowed.

Summary

Issues: Disallowance of deduction claimed u/s. 54F of the Act for investment in new house property.

Analysis:
1. Issue of Disallowance of Deduction u/s. 54F: The assessee appealed against the disallowance of deduction claimed under section 54F of the Act for investing in a new house property. The assessee sold four pieces of land and invested the sale consideration in the acquisition of four flats in a project named "Khushi Classic." The Assessing Officer (AO) disallowed the deduction on the grounds that the flats were purchased beyond the two-year period from the date of the land sale and because the assessee purchased more than one residential house.

2. Assessee's Submission: The assessee contended that the flats were booked as one unit and paid for within the stipulated time period. The builder allotted the four flats to the assessee in 2015, although the final sale deed was executed in 2019. The flats were treated as a single unit by both the builder and the assessee, situated on the same floor and used as a single residential unit. The assessee fulfilled all conditions under section 54F for claiming the deduction.

3. Revenue's Argument: The Senior DR argued that the possession of the flats was given to the assessee in 2019, after four years from the land sale, justifying the disallowance of the deduction under section 54F.

4. Tribunal's Decision: The ITAT Cuttack Tribunal found that the entire sale consideration was invested in acquiring the four flats within a month of receiving the sale proceeds. The builder had allotted the flats to the assessee in 2015, and they were treated as a single unit. The Tribunal relied on the Supreme Court's decision in Sanjeev Lal Vs. CIT, emphasizing the creation of rights in the flats upon allotment in 2015, making the assessee eligible for the deduction under section 54F. The Tribunal directed the AO to allow the deduction, ruling in favor of the assessee.

5. Conclusion: The Tribunal allowed the appeal, emphasizing that the four flats constituted a single residential unit, fulfilling the conditions for claiming the deduction under section 54F of the Act. The decision highlighted the importance of the allotment date and the treatment of the flats as a unified residential unit, ultimately granting the deduction to the assessee.